12th January 2000 Archive

BT is acquiring Esat Telecom Group, Ireland's second-largest telecom company for $2.46 billion, in cash, following a bidding war against a hostile bid from the Norwegian Telenor, and outbidding the company by 18 per cent. Esat and Telenor both own 49.5 per cent of Esat Digifone, which is thought to be the main prize for BT. The Esat board is recommending the deal to shareholders. BT is paying $100 for each Esat American depositary receipt, with each ADR being worth two Dublin-traded shares. Most trading is in the US. Telenor had tried unsuccessfully to merge with the Swedish state-owned Telia, but the deal fell apart. BT collaborates with Telenor over customer use of each other's networks, and in their ownership of the Swedish telecom company Telenordia, which is unlikely to be affected. ®

IBM is increasing its bet on Linux by adopting software's counter-culture as a primary operating system for the Internet. This turns a series of initiatives within IBM into a strategic, company-wide embrace. The reason appears to be to make IBM big iron more attractive for running networks, and to provide some tougher competition for Sun. IBM has Linux for the RS/6000 and S/390, as well as Netfinity, and is evaluating whether its NUMA-Q servers will run Linux. Despite IBM's avowed seriousness about supporting NT, few thought that this was more than a commercial decision to give customers what they wanted, rather than an expression of IBM's whole-hearted admiration for Windows. In making the announcement, Sam Palmisano, senior VP of IBM's enterprise group, made it clear that IBM intends to work closely with the Linux community as well as to make its own technology available to the Linux and open software communities, stressing it is not confining its efforts to Linux, but to open source software generally. The collaborations with Caldera, Red Hat, SuSE and TurboLinux will continue. To this end, Irving Wladawsky-Berger is heading a new IBM unit within the enterprise group. IBM says it is not abandoning its AIX efforts or Project Monterey, but believes that the markets are different. IBM hastens to point out that although Linux is open and free, "open source does not mean free. IBM will continue to deliver its value-added middleware as priced packages." ®

Novell has plugged a hole in its plans to take its directory services onto the Internet by acquiring JustOn, a provider of Internet hosted file sharing and publishing services. The company's services are to be integrated with Novell Directory Services (NDS) and In-theNet Services products, including caching, directory, identity management and messaging. Novell sees its strength in directories as being a key weapon that will allow it to benefit from the rise of 'any time, anywhere' computing. It has expanded NDS coverage from the core NetWare platform to NT, Solaris, Linux and Tru64, but more intriguingly it has been experimenting with consumer systems that leverage its competence in directories, and that will ultimately put the company into direct competition with Microsoft in consumer markets. Novell is running a Web-based email pilot scheme, Myrealbox, and a far more ambitious identity, credential and relationship management system, digitalme. The latter stores user's passwords, credentials and profiles, and Novell proposes to have the system's users devise "MeCards" which contain specific collections of data needed for specific tasks on the Web - shopping at favourite stores, for example. Schemes of this class are of course generally a privacy nightmare waiting to happen, but they're going to work properly eventually, and Novell probably has one of the better shots at making them work. One of the obvious holes in digitalme, in any event, is application service provision, so the JustOn deal ought to produce considerable synergies. Novell's efforts in the field, although obviously ambitious, have been relatively low-key so far, but it seems there's a major push due this year. According to VP for strategic business Mike Sheridan, "JustOn's technology and expertise will help make file services a core element in the spectrum of In-the-Net Services that will be coming from Novell in 2000." ® Related stories:Digitalme launches

Ten year trusty given Pocket PCs, Handhelds and mobile phones to play with

When Microsoft was saying how great it was to be developing Office for Mac OS X last week, the mouthpiece from the Mac Business Unit was, we noted, "acting." Now all becomes clear - former general manager of the unit Ben Waldman has now popped up as VP of the Microsoft Mobile Devices Division. The what? Well, it seems this division represents a strengthening of the mobile and wireless development being carried out under the banner of Bob Muglia's Business Productivity Group, so it's a different, parallel development track to the CE operating system development being carried out within Jim Allchin's platforms group. Muglia has the productivity and BackOffice apps, so device/appliance work carried out in his group is more clearly associated with server-based applications. Waldman is a career Microsoftie, joining straight from Harvard in 1989, leading the Windows Office 97 development team and then founding the Mac Business Unit three years ago. His brief now is to "lead design, development and marketing of software for mobile devices such as Pocket PCs, Handheld PCs and mobile phone products." Given that there's not exactly a gigantic retail market for these, nor is there likely to be, we'd guess Waldman will be doing a lot of schmoozing with wireless service providers, OEMs and handset manufacturers. ®

Prices of TFT screens are expected to fall as last year's supply problems come to an end. Shortages will still exist in the notebook PC market but this is unlikely to be major problem during Q1 due to seasonal demand patterns. In Q4 last year, global production was up 41 per cent to 6.46 million LCD-TFT sheets. New mass production lines go into operation in Taiwan, Korea and Japan later this year with a estimated capacity of 8.18 million sheets compared with a demand of 7.82 million according to AsiaBizTech. In the third quarter of 1999, a 15in TFT-LCD panel for desktops sold for $650. That price is expected to fall to around $400 by Q4 2000. ® See also:Korean IT sector has a bumper 1999Taiwan beefs up TFT facilitiesLCD drought set to worsenTFT famine until 2001

Here's a way to stamp out rampant software piracy in British schools -- move over to Linux. It's easier, of course, when you're opening up on a greenfield site, like Red Hat Linux adopter Parrs Wood High School, the first school in Britain to be opened in the 21st Century. Based in Manchester, Parrs Wood is also the first school in Britain to offer Web site access through digital TV. It's hooked up video conference links with seven European schools, and it's linked all the primary schools in the area to its library and technology laboratories. Parrs Wood is classified as a City Learning Centre, which means the local neighbourhood gets to play with the technology toys, too. And it's sponsored by Red Hat. The company gets an early reward in the form of a massive thumbs-up from head teacher Iain Hall. "We are delighted to be launching phase one of Parrs Wood school today with the support of Red Hat," he says. "Red Hat Linux enables educational institutions to save money and broaden the opportunities of information technology to all schools - something to which we are committed as an organisation. It also offers better performance than can be achieved with traditional operating systems." In due course, Parrs Wood will have 1,800 students on its school-roll. ®

IBM today unveiled the eighth addition to its Netfinity server range, aimed at the ISP and ASP markets. The UK can expect to see first shipments of the Netfinity 4000R in March, along with the rest of the EMEA region. Big Blue claims the server is the thinnest Intel-based server on offer from a major vendor. It is a mere 1.75in (45mm) thick. The machine, already launched in the US, uses two Intel 500MHz chips – allowing capability for 84 processors per industry standard rack. It offers up to 2GB memory, 1.5 Terabytes storage, and supports Windows and Linux. IBM said it would not release pricing until nearer shipping time. The 4000R, which measures 24in x 1.75in x 19in, is aimed at helping ISP server farms pack more machines into a confined space and save companies money on office space rental. The floor space needed to accommodate the cubic volume of this server would cost £3,000 per year to rent in the City of London, according to IBM, obviously at pains to prove that size (or a lack of it) matters. Last month the US vendor cut prices on some of its Netfinity server ranges by up to 26 per cent. ® See also:IBM ups PC server price war

Support for Apple's upcoming Palm-based PDA, samples of which are now coming off the production line, is to be build into MacOS X, according to company sources cited by MacOS Rumors. That would suggest the device will be announced sometime before the next-generation OS' ship date of next summer, probably in limited at next July's Macworld Expo in New York and in volume by early August. The PDA could be the highlight of CEO Steve Jobs' Macworld keynote, having been moved back to allow him to unveil between now and then all the hardware he was supposed to have announced last week. MacOS X's support for the PDA is said to centre on displaying the device's contents on the desktop as if it were a mounted hard drive, allowing data and software to be installed by drag and drop. Synchronisation will be automatic -- and, thanks to USB, fast. At this stage, the device is likely to use Palm's Palm Desktop software as its main personal information manager interface. While it's not beyond Apple's means to come up with an application of its own, why reinvent the wheel? The upshot of all this should be that existing Palm and Handspring Visor owners will be able to use their devices with MacOS X, the plan perhaps being not only to offer the best Palm-based handheld but provide PDA users with the best desktop experience too. In the days when the Palm machine was touted simply as an adjunct to a PC, that wasn't much of an issue, but now, in the increasingly mobile world, it's becoming a standalone platform in its own right and perhaps soon leading desktop purchases rather than following them, getting the desktop experience right has become much more important. As for the device itself, it's not hard to predict an iBook-esque version of Palm V: a slimline dual-colour case (with several main hues), USB for synching, MacOS-style interface buttons, support for Handspring's Springboard add-ons (since Springboard is essentially free to licence, Apple may as well use it) and possibly a colour screen now that the PalmOS and the platform's Dragonball CPU supports it. One final option is AirPort wireless networking, though it will be interesting to see whether the device's power supply would be up to the task, especially if the PDA does indeed ship with a colour screen. ®

Investors left shares of AOL and Time Warner down sharply at the end of Tuesday's trading, amid suspicions that the high-tech superstar's phenomenal growth will be brought down to something approaching realistic rates as a result of the proposed merger. Thus AOL shares fell by 11 per cent in heavy traffic yesterday, dropping $8.25 per share to $64.37 at the close of trading, while Time Warner fell $6.12 per share to close at $86.12.

High street giant fends off pressure from falling margins, Yahoo does well too

Dixons saw almost £3 knocked off its share price today after warnings over falling margins overshadowed rocketing profits. The group posted pre-tax profit of £299.4 million for the six months ended 13 November 1999, against the previous year's £68.9 million. Sales increased 18 per cent to £1.67 billion, with profit - after exceptionals and Freeserve losses - totalling £92.5 million. "We achieved a good performance in the first half in a deflationary retail environment," said Sir Stanley Kalms, Dixons chairman. "Over the Christmas period, the growth of digital technology and lower prices ensured sales remained strong, although there was a further reduction in gross margins." Dixons' share price had dropped 19 per cent to 1182 pence on the back of the news. The group has also outlined plans to spend £30 million on ecommerce over the next two years. Dixons said online sales for the first half were up six times on the previous year. "The Group believes that software is a category in which online sales will capture a large share of the market," it stated. Regarding Freeserve, Dixons said the ISP now had 1.6 million active users, up 400,000 from the start of the financial year. Total minutes online in the period were 4.1 billion, with page impressions in November up 72 per cent to 110 million. The company also announced it would return £121 million, or 25 pence per share, to shareholders as part of a company restructure. This will include setting up a new holding company for itself – "New Dixons" - and for Freeserve – "Freeserve Holdings". Elsewhere, Yahoo released its fourth quarter results, with pre-tax profits at $57.5 million, up on $12.8 million for the same quarter last year. Sales were $201.1 million against last year's $91.3 million. ® Related stories:Freeserve soars in first day tradingDixons sees sales and profit grow

Increased competition and price slashing have been blamed for a $35 million net loss from Seagate for Q2, the period ending 31 December. The loss includes a restructuring charge of $23 million. As the PC market pushes prices down, so margins get squeezed in the component market. a factor which will affect not just Seagate, but its competitors too. Seagate's quarterly revenue dropped 11 per cent to $1.6 billion and earnings were down 14 cents a share. Even so, this performance beat analysts' expectations. James Corridore, an S&P Equity Group analyst, told Cnet's news.com: "They had a pretty decent quarter and pricing was not as tough." He was said to have been expecting profit of 7 cents a share. ® Related StoriesJobs blow at SeagateSeagate fires 10,00 Quantum posts heavy losses

Caldera Systems' draft IPO filed at the SEC on Monday shows that the company plans to raise a maximum of $57.5 million and will trade under the ticker symbol CALD, but it will be some time before the issue is priced. The statement shows the company has never made a profit, and had net losses of $7.9 million on revenue of $1.06 million in 1998 and $9.3 million on revenue of $3.1 million in 1999. Furthermore, Caldera expects the losses to continue, so the offer has all the hallmarks of being successful in these irrational (no, wonderful - Ed) times. In the last FY, some 10 per cent of revenue came from services. Caldera Systems has 108 employees. In September 1999, Caldera's US trademark applications for OpenLinux and Linux for Business were rejected, although a trademark application for Caldera Systems is pending. The company was split from Caldera Inc in September 1998, with DR-Dos and embedded client software going to Lineo, the other company split from the holding company. There is cross-ownership between the Caldera companies, with 1.25 million shares of Caldera Systems being sold to Lineo for 3,238,437 shares of Lineo in the last few days. Caldera Inc had received $19.9 million for Linux assets from Linux Systems. It is planned to change the company registration from Utah to Delaware, where takeover law and officer liability is more favourable for companies. Microsoft used to be registered in Delaware, like most large corporations, but the state of Washington changed its law with respect to officer liability, in order to accommodate Microsoft's desire to be registered in the state, it was believed. Caldera is trying to carve out a niche as a "leading provider of Linux for eBusiness", but there is no mention of a portal strategy. The prospectus points to reliance on technology partners like Citrix, Novell and Sun, but in view of the recent $30 million investment by these companies in Caldera, there would appear to be little to fear on that front. It is revealed that in December 1999 and January 2000, Caldera issued 5,000,000 shares of Series B convertible preferred stock at a purchase price of $6.00 per share to Chicago Venture Partners, Citrix, Egan Managed-Capital, Novell, Sun and SCO, with Citrix, Egan, Novell, Sun and MTI Technology (a Noorda company) nominating a director. The filing, made the same day as the investments were announced, does not show how the shares to the new investors were distributed, but a revised filing will no doubt reveal this. These investments now look to be very good if the Linux factor continues to hold up in the market. Caldera paid Sun $1.3 million for rights to Java. Caldera is relying significantly on its business relationship with evergreen for eBuilder, a Java-based component framework expected around mid-year. It had always been assumed that former Novell CEO Ray Noorda effectively owned Caldera through his Canopy family trust, and this is confirmed: through Canopy and personally he has 83.8 per cent, with MTI holding 16.1 per cent. Ransom Love, the Caldera Systems CEO, has 533,000 options. Also announced on Monday was an IPO by Playboy.com, with Bear Stearns being the co-underwriter of the Playboy and Caldera offerings. ®

Evesham Micros is launching a range of PCs offering Internet use free of monthly fees or call charges. The UK company has got into bed with CallNet0800 and F1 Racing Telecom to offer a range of three PCs starting from around £700. CallNet0800 is the toll-free ISP which has been inundated by UK users hungry to register for the service since its launch in November. Last week the company confirmed that it still had a backlog of people trying to sign up. The cheapest PC on offer is the Zydec 0800, with Celeron 400MHz chip, 64MB, 8.4 GB hard drive, 15in monitor, CD-Rom and Windows 98. It costs £594.89 ex VAT. At the other end of the scale is the EveshamVale Athlon 0800, with Athlon 550MHz, 128Mb, 13Gb hard drive, 16MB TNT2 Graphics, 17in monitor and DVD-Rom. It costs £1020.43 ex VAT. The Worcestershire-based company claims to be the first to offer PCs with pre-loaded free Web use in this country. The bundles also include £20 of free phone calls. "Totally free Internet access is what the UK computer user has been wanting for a long time," said Richard Austin, Evesham MD. The machines will be available from tomorrow. Related stories:So how good is CallNet 0800?CallNet 0800 up and runningCisco backs CallNet0800 expansionEvesham opens Dublin franchise

A legal action over Palm's alleged violation of a Xerox patent for handwriting input technology is heading back to court, after a delay caused by a re-examination of the patent by the US Patents and Trademark Office at the request of 3Com, which now owns Palm. A recent 10Q filed with the SEC by 3Com has revealed that the PTO had issued in mid-December a notice of intent to issue a re-examination certificate, and that there would be no changes in the patent specification. 3Com has evidently decided not to pursue a legal challenge to the decision, since it immediately asked the District Court for the Western District of New York to lift the stay on the action that had been granted last June pending the PTO decision. Xerox had started the litigation in April 1997. Xerox claims that the Palm Pilot Graffiti product is breaching a patent developed at its Palo Alto research centre and used in the Palm Pilot. At PARC, the technology was rather unimaginatively called "unistrokes". Xerox indicated it would be prepared to reach a settlement over the matter, but the timing is unfortunate for 3Com in view of its forthcoming IPO for Palm Pilot. Less than 20 per cent of the shares are likely to be offered, with the remainder of the shares being distributed to 3Com shareholders (subject to a favourable tax ruling) about six months later. The Xerox litigation is likely to cast a shadow over the offering unless it is settled quickly, since in the event that Xerox prevails, as now seems likely, there will be a back claim for royalties on more than five million Palm Pilots. ®

The Department of Justice has decided to push for the breakup of Microsoft, according to a report in today's edition of USA Today. According to the paper, which cites "sources," this represents a consensus view between the DoJ itself and the group of US states which is its partner in the antitrust action. The report was however hotly disputed by the DoJ later today. Or at least it was disputed to some, indeterminate extent. A DoJ spokeswoman said: "The story is inaccurate in several important respects. It does not accurately represent our views." Interesting this - by implication, she's suggesting it's not wholly inaccurate, and she's not specifying the areas of inaccuracy, either. Clearly the options floated in the story must have been, and quite possibly still are being, considered, and equally clearly there would have to be a lot more to any settlement. There's also the small matter of the settlement mediator being likely to go ballistic in the event of leaks. So maybe the denial isn't as solid as you might initially think. The DoJ and the states have tended to be at variance over the remedies that should be demanded. The DoJ made most of the running in the trial itself, with the states largely on the sidelines, but the states have been considerably more hawkish than the DoJ. Today's report suggests that they will now call for Microsoft to be broken into separate companies, one dealing with the Windows operating systems, and one with applications. If the DoJ has a view as to what should be done with Microsoft's Internet operations, however, that doesn't seem to have leaked yet. Structurally, if a breakup is deemed to be the best solution, the logical fault lines take Microsoft into three companies, OS, apps, and Web, not two, with Rick Belluzzo's Consumer Group looking like a natural third leg. If the DoJ really has firmed up on what it's going to demand, it may help push Microsoft closer to negotiating a settlement before the judge looses off his next volley. Microsoft isn't generally thought likely to agree to something as drastic as a breakup, but if you think about it, it's not entirely beyond the bounds of belief that the company could go for a simple split into two or maybe three operations. Other suggested remedies have been a lot more drastic. Forcing Microsoft into some kind of partial open sourcing solution whereby it had to freely license Windows and open up the code, for example, would be far nastier from the company's point of view. Nor would the nightmare scenario of setting up multiple Baby Bills, all competing with one another over Windows development, play well in Redmond. Microsoft has however been reorganising itself along lines that do seem to point to a split, with a platforms group running Windows, Business Productivity dealing with apps and Consumer handling Internet and general cheap stuff. Making these into separate companies needn't hurt too much, and could be seen as a bargain by Microsoft, if other remedies could be minimised. These other measures could include price controls, open pricing and discount schedules, and severe limitations on and scrutiny of Microsoft's contracts with the PC companies. Imposition of this kind of stuff would severely limit Microsoft's ability to operate (misbehave, as some might say) in the OEM market, so an attempt to trade off an apparently drastic breakup against these mightn't be entirely out of the question. ®